Fresh Ideas Emerge for New EU Budget Levies

This article analyzes the separate-entity principle as applied in the OECD Transfer Pricing Guidelines, exploring its theoretical foundations and practical consequences. It evaluates tensions between formal legal separateness and economic integration within multinational enterprises.

This article examines Australia’s tax treaty policy from the perspective of a capital-importing but high-income jurisdiction. It explores the tension between Australia’s interest in protecting its source-country tax base and the constraints imposed by prevailing OECD treaty norms. Through analysis of treaty practice and policy choices, the article highlights structural trade-offs faced by capital-importing countries in negotiating withholding taxes, permanent establishment thresholds, and allocation rules within the existing international tax framework.

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Citation: McDonald, Michael, Income Shifting from Transfer Pricing: Further Evidence from Tax Return Data, 94 Journal of Public Economics 555 (2010).
Earlier version available at SSRN: https://ssrn.com/abstract=6022454.

This article analyzes the OECD Pillar Two global minimum tax following its initial implementation phase, focusing on the structural mechanics of the regime and emerging signs of geopolitical fragmentation. The author examines how divergent domestic implementation choices, enforcement asymmetries, and coordination challenges affect the operation of the income inclusion rule and undertaxed profits rule. The article highlights risks to coherence and convergence as jurisdictions adapt Pillar Two to local political and fiscal priorities.

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This article examines how residence-country double tax relief methods and tax sparing provisions shape negotiated withholding tax outcomes in tax treaties between developing countries and OECD member states. Focusing on portfolio dividend withholding taxes, the analysis shows that treaties with credit-method residence countries tend to produce larger gaps between domestic withholding rates and treaty ceilings than treaties with exemption-method partners. The study further demonstrates that tax sparing provisions neutralize this effect, enabling developing countries to sustain higher negotiated withholding taxes. The findings contribute to debates on treaty design, distributive consequences of relief methods, and the role of tax sparing in preserving source-country taxing rights.

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The authors argue that the components of the U.S. minimum tax regime in the form of a tax on net CFC tested income, the CAMT and the BEAT, form a dense and overlapping tax structure that imposes significantly higher compliance burdens than EU Pillar Two regimes, undermining any characterization of the U.S. system as a permissive or lightly enforced alternative.

On April 2, 2025, President Donald Trump’s announcement of the “Liberation Day” tariffs created an unexpected and finely targeted episode of trade policy uncertainty, threatening U.S. trading partners with additional tariffs of 10 to 50 percent depending on bilateral negotiations. Using transaction-level U.S. import data, the paper shows that firms responded almost immediately by shifting sourcing away from high-risk countries toward low-risk ones. Total import values remained stable, but this rapid reallocation increased import prices. The adjustment was concentrated among firms with relationship-sticky, contract-dependent, and trade-finance-intensive supply chains, consistent with their elevated exposure had tariffs materialized before renegotiation was possible. These results show that even short-lived episodes of tariff uncertainty can meaningfully disrupt supply chain configurations and raise costs.

The Fourth Industrial Revolution has reshaped extractive industries through automation, remote mining technologies, and artificial intelligence, improving safety and productivity while straining tax frameworks built for human-based operations. This article evaluates how remotely operated mining trucks, autonomous machinery, and robotics complicate payroll taxation, residence taxation, and Value Added Tax (VAT) in South Africa’s extractive sector. Drawing on the Income Tax Act, relevant Double Taxation Agreements, and the OECD Multilateral Instrument, the analysis identifies regulatory gaps in attributing income from automated work, determining corporate residence in digitally mediated operations, and applying VAT to cross-border remote mining services. The article proposes targeted reforms—including a strategic robot-tax design, updated residence guidance for digitally operated enterprises, and refined VAT rules—to preserve revenue, reduce ambiguity, and support inclusive growth amid accelerating technological disruption.